The Reserve Bank of India has proposed a consumer compensation framework to address losses from unauthorised or unintended digital transactions, offering targeted relief as online payments through UPI, debit and credit cards, and internet banking rise across the country. The draft aims to bolster trust in India’s expanding digital payments ecosystem while recognising the growing sophistication of cyber fraud.
Scope of the proposed relief
Under the draft framework, customers affected by small-value cyber frauds could receive compensation of up to ₹25,000 or 85% of the loss, whichever is lower. The proposal focuses on genuine, non-malicious cases where customers suffer financial loss without intent to defraud.
RBI’s approach explicitly accounts for social‑engineering attacks — for example, instances where customers are tricked into sharing OTPs or authorising payments under duress or deception. Where such actions are assessed to be unintentional, the draft allows for compensation, recognising the blurred lines between victim error and criminal coercion in modern cybercrime.
Why the focus on small-value frauds matters
Statistics from multiple sources show most reported cyber frauds in India involve relatively modest sums, commonly below ₹50,000. Individually these losses may seem small, but they disproportionately affect middle‑income households, students, senior citizens and first-time digital users, undermining financial security and confidence.
By covering part of these losses, the RBI intends to limit immediate financial distress for vulnerable users and encourage wider adoption of digital payments by demonstrating that systemic protections exist.
Funding and eligibility conditions
The compensation pool is expected to be financed through a mix of institutional sources. Possible contributors include the Depositor Education and Awareness Fund and shared liability mechanisms involving banks. The draft also contemplates limited customer liability in specified circumstances to balance responsibility between users and service providers.
To prevent abuse, the scheme would likely permit compensation only once per customer and mandate prompt reporting of fraud within a stipulated timeframe. These stipulations are designed to support genuine victims while discouraging opportunistic claims.
Complementary safeguards and regulatory context
The compensation framework forms part of a wider RBI effort to strengthen digital payment safety. The regulator is expected to roll out complementary measures such as enhanced authentication standards, delayed settlement for flagged transactions, and tailored protections for senior citizens.
These measures reflect an evolving regulatory stance that seeks to balance rapid innovation in payments with heightened consumer protection and operational resilience, as India moves towards an increasingly cashless economy.
Implications for users and providers
For millions of Indians who rely on digital payments for everyday transactions, the proposed ₹25,000 relief could serve as a practical confidence booster, particularly for those wary of online banking due to fraud risks. While final rules and operational details remain pending, the proposal signals a policy shift that places consumer welfare at the centre of India’s digital finance strategy.
